Unitholder Agreements

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What is a Unitholder Agreement?

A unitholder agreement is a contract between the trustee of a unit trust and its unitholders. The agreement sets out the obligations and rights of unitholders whilst they hold units in the unit trust, and those of the trustee.

How is a Unitholder Agreement different to a unit trust deed?

A unitholder agreement operates in addition to the unit trust deed, and deals with matters that are not expressly addressed in the unit trust deed.

The unit trust deed typically deals with the formation and management of the unit trust, and outlines the powers and obligations of the trustee.

In contrast, the unitholder agreements focusses on the relationship between the unitholders and the trustee, and establishes a framework for the unitholders to:

  1. resolve deadlocks at unitholder meetings;
  2. address and resolve disputes between unitholders; and
  3. exit the unit trust.

What issues are covered in a Unitholder Agreement?

A unitholder agreement will generally address the following matters:

  1. obligations of the unitholders to each other and to the trustee;
  2. any right of a unitholder to appoint a director to the trustee’s board (in the case of a corporate trustee);
  3. the voting rights of unitholders at meetings;
  4. the voting rights of a director appointed by the unitholder at meetings of the trustee’s board (in the case of a corporate trustee);
  5. the process for calling and conducting, and voting at, meetings of unitholders;
  6. the process for transferring units in the unit trust, including any events that may trigger an obligation on a unitholder to transfer its units (for example, insolvency of a unitholder or default by a unitholder);
  7. whether any restraints of trade will apply to the unitholder and their affiliates, and the duration and parameters of such restraints;
  8. the consequences of death or permanent disability occurring to a unitholder;
  9. the procedure for determining whether a distribution should be made to unitholders; and
  10. the types of decisions concerning the unit trust’s business which require unanimous or special resolutions of the unitholders; and
  11. the process for determining a deadlock at a unitholders’ meeting.

The breadth of issues that can be addressed in a unitholder agreement allows parties the flexibility to cover a variety of circumstances.   However, it can also give rise to complex matters to be considered by the parties.  It is therefore essential that you seek legal advice in preparing a unitholders agreement that is tailored to your specific circumstances.

How can Coulter Legal help?

The experienced team at Coulter Legal has advised clients on detailed unitholder agreements with complex arrangements involving numerous parties, as well as more straightforward agreements with only two parties.  We will guide unitholders through the particular requirements of a unitholder agreement, and draft a unitholder agreement that will provide clarity to both the trustee and its unitholders.

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